State surplus will go toward welfare, disaster relief, schools

COLUMBUS (AP) -- The state ended the budget year an extra $44 million in the black due to higher-than-expected collections of income and corporate taxes and added nearly $400 million to its rainy-day fund, budget director Tom Johnson said Friday. Budget officials in May had predicted a $500 million surplus, but income, corporate and cigarette tax collections in June exceeded expectations, Johnson said. Beginning Friday, smokers pay an extra 70 cents a pack in cigarette taxes. Of the $544 million surplus, $60 million will go toward replenishing a federal welfare account, $40 million will be put in a disaster services fund and $50 million will be put in a public school building fund, Johnson said. The remaining $394 million will be added to the $180 million already in the rainy-day fund for a total of $574 million, he said. That represents 2.3 percent of spending during the budget year that ended Thursday and moves closer to the goal of 5 percent, he added. Balancing act In preparing the 2004-05 budget, the Legislature had to plug a $1.1 billion shortfall in revenues by the end of the 2003 fiscal year. By law, the state must end the year with a balanced budget. Lawmakers faced no such pressure this year, although Gov. Bob Taft called the 2006-07 budget that took effect Friday the tightest in 40 years. "Over the past year, the personal income tax and corporate franchise tax have performed stronger than we originally anticipated," Johnson said. "In this last month, revenues continued to perform and one of our surprises was the additional cigarette tax, people were buying cigarettes before the tax went up." Because of increased projections over the next two years, budget officials expect to add $300 million to the rainy-day fund. Overall, the state estimates it could receive $800 million more than expected over that period.